Correlation Between State Bank and Tech Mahindra
Can any of the company-specific risk be diversified away by investing in both State Bank and Tech Mahindra at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining State Bank and Tech Mahindra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Bank of and Tech Mahindra Limited, you can compare the effects of market volatilities on State Bank and Tech Mahindra and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in State Bank with a short position of Tech Mahindra. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Tech Mahindra.
Diversification Opportunities for State Bank and Tech Mahindra
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between State and Tech is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Tech Mahindra Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tech Mahindra Limited and State Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on State Bank of are associated (or correlated) with Tech Mahindra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tech Mahindra Limited has no effect on the direction of State Bank i.e., State Bank and Tech Mahindra go up and down completely randomly.
Pair Corralation between State Bank and Tech Mahindra
Assuming the 90 days trading horizon State Bank is expected to generate 1.55 times less return on investment than Tech Mahindra. But when comparing it to its historical volatility, State Bank of is 1.05 times less risky than Tech Mahindra. It trades about 0.05 of its potential returns per unit of risk. Tech Mahindra Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 96,805 in Tech Mahindra Limited on September 2, 2024 and sell it today you would earn a total of 74,425 from holding Tech Mahindra Limited or generate 76.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.59% |
| Values | Daily Returns |
State Bank of vs. Tech Mahindra Limited
Performance |
| Timeline |
| State Bank |
| Tech Mahindra Limited |
State Bank and Tech Mahindra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and Tech Mahindra
The main advantage of trading using opposite State Bank and Tech Mahindra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, Tech Mahindra can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tech Mahindra will offset losses from the drop in Tech Mahindra's long position.| State Bank vs. Reliance Communications Limited | State Bank vs. Bodhi Tree Multimedia | State Bank vs. Network18 Media Investments | State Bank vs. General Insurance |
| Tech Mahindra vs. Kaushalya Infrastructure Development | Tech Mahindra vs. Kingfa Science Technology | Tech Mahindra vs. Rico Auto Industries | Tech Mahindra vs. GACM Technologies Limited |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |